Market Summary

Yield Movements

The Republic of Korea's local currency (LCY) government bond yields rose an average of 43 basis points for all tenors between 3 November 2025 and 6 February 2026 as the Bank of Korea (BOK) pursued a hawkish policy stance in its 15 January monetary policy meeting statement, signaling the possible end of its easing cycle. The BOK maintained the base rate at 2.50% at both its 27 November and 15 January meetings amid stable economic growth and inflation, and as risks to financial stability remained. The BOK also removed language on any "further potential rate cuts," which had appeared in previous statements, from its January monetary policy statement.

Local Currency Bond Market Size and Issuance

LCY bonds outstanding in the Republic of Korea reached KRW3,496.1 trillion at the end of December, reflecting an increase of 1.4% quarter-on-quarter (q-o-q). The expansion moderated from 2.3% q-o-q in the previous quarter due to reduced issuance of government bonds. Government bonds outstanding marginally increased 0.6% q-o-q; while expansion in the corporate bond segment was roughly stable at 1.9% q-o-q in the fourth quarter of 2025. Total LCY bond issuance rose 3.4% q-o-q, solely driven by the 21.0% q-o-q increase in corporate bonds while government bond issuance fell 30.4% q-o-q.

Sustainable Bond Market

The Republic of Korea's sustainable bond market reached a size of USD188.4 billion at the end of 2025, remaining the second-largest sustainable bond market in emerging East Asia and comprising 24.6% of the regional total. By bond type, social bonds continued to dominate the Republic of Korea's sustainable bond market with a share of 53.6%, followed by green bonds with the second-largest share at 28.9%.